Yen drops to April 2011 low after pro-stimulus Abe wins election

The yen fell to the weakest level since April 2011 versus the dollar after Shinzo Abe’s Liberal Democratic Party won Japanese elections yesterday, giving him a mandate to act on pledges of expanded monetary stimulus.

Japan’s currency declined as Abe has called for the central bank to double its inflation goal to 2 percent and undertake unlimited easing to revive economic growth. Bank of Japan policy makers meet on Dec. 19-20. Sweden’s krona climbed against all of its major peers before the nation’s central bank sets policy tomorrow. The pound strengthened to a two-month high against the dollar.

“People that fight the Abe government will find themselves out of control,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “Nobody wants to fight this trend and there is still a lot of interest to sell yen against dollar and euro on dips.”

The yen fell 0.3 percent to 83.75 per dollar at 10:49 a.m. New York time, after depreciating to the weakest since April 12, 2011. Japan’s currency dropped 0.3 percent to 110.26 per euro, after declining to the least since March 21. The euro was little changed at $1.3166.

Annual View

Japan’s currency has lost 11.9 percent this year, the worst performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after New Zealand’s dollar. The dollar is off 3.1 percent while the euro has dropped 1.5. For the past month, the yen is down 5.4 percent, the greenback fell 2.3 percent and the shared currency is up 1.4 percent.

The Swedish krona advanced amid speculation that the Riksbank may not give any indication of a continued easing of monetary policy tomorrow. All but one of 17 economists surveyed by Bloomberg predicted the bank will cut its main repurchase rate by 0.25 percent to 1 percent when policy makers publish their decision tomorrow. The currency dropped the most in two months against the euro last week.

The krona traded 0.5 percent stronger at 8.7465 per euro after dropping 1.7 percent last week, the biggest decline since the period ending Oct. 5. It appreciated 0.5 percent to 6.6440 per dollar.

The pound gained against the dollar and the yen before a report that economists said will show inflation remained at its fastest since May, adding to evidence the central bank won’t continue to expand its balance sheet. The Labor Department reported last week consumer prices in the U.S. fell more than forecast, allowing the Federal Reserve to undertake more quantitative easing.

The pound rose 0.2 percent to $1.6200, after gaining to the most since Oct. 5.